SailPoint Technologies Holdings, Inc.
Q1 2021 Earnings Call Transcript

Published:

  • Operator:
    Greetings and welcome to the SailPoint Technologies Holdings, Inc. First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Josh Harding, Vice President of Financial Planning, Analysis and Investor Relations. Please go ahead.
  • Josh Harding:
    Good afternoon and thank you for joining us today to discuss SailPoint's first quarter 2021 financial results. Joining me today are SailPoint's CEO and Co-Founder, Mark McClain; and our Chief Financial Officer, Jason Ream. Please note that today's call will include forward-looking statements. And because these statements are based on the company's current intent, expectations and projections, they are not guarantees of future performance, and a variety of factors could cause actual results to differ materially. Since this call will include references to non-GAAP results, which excludes special items, please reference this afternoon's press release in the Investors section of sailpoint.com for further information regarding forward-looking statements and reconciliations of GAAP to non-GAAP results. And now I'd like to turn the call over to Mark McClain.
  • Mark McClain:
    Thanks, Josh, and thanks to each of you for joining the call today. I'm very pleased to share our first quarter fiscal year 2021 results with you. In a very strong first quarter, we comfortably exceeded our internal sales goals and at the same time, our mix shifted towards SaaS faster than we had been expecting, resulting in $270.2 million of total ARR at quarter-end and a year-over-year growth of 43%. We reported quarterly total revenue of $90.8 million, including SaaS revenue of $21.2 million, up 20% and 55% year-over-year respectively. Our excellent results this quarter were driven by a high level of execution across the business and continued demand for SailPoint's Identity Platform. We established strong momentum in 2020, and continue to build on that this year, seeing both our average deal size and number of new logos increased notably as compared to Q1 2020. We believe the results this quarter are a testament to increase the appreciation of identity security as organizations strive to balance the fine line between enabling and securing their largely remote or hybrid workforce today. As we indicated during our financial Analyst Day in February, identity security has become a critical area of focus among enterprises. This is driving growing interest and commitment from the upper end of the enterprise market in our SaaS Identity Platform. We believe this trend will continue throughout 2021 and beyond as more and more enterprises recognize that their legacy on-prem identity solutions are not capable of providing the level of visibility and protection they require. Importantly, enterprises of all sizes are recognizing that taking a SaaS-first approach will give them the simplified yet sophisticated identity security program that only we provide to fully address the complexity of their enterprise needs and at scale.
  • Jason Ream:
    Thank you, Mark; and thanks to everyone joining us on the call today. On the call, I will review our first quarter results and then update you on our expectations for the rest of the year. Let me start off by saying that we had a very strong quarter and we meaningfully outperformed our new bookings expectations. Furthermore, our mix accelerated shift in the direction that we would like to see it go, in other words, towards SaaS and subscription. In fact, subscription represented over 70% of new software bookings in the quarter, and SaaS as a percentage of the mix was almost 10 points higher than our plan going into the quarter. As Mark mentioned earlier, we're seeing appetite for SaaS across the enterprise customer spectrum and our internal team is more comfortable than ever pitching and delivering our SaaS products. We believe that the acceleration towards SaaS that we saw in Q1 is an indicator of where this business is going in the near future, driven by strong new bookings, faster than expected mix shift and retention that was better than plan. Total ARR grew by $19 million in the quarter to $270 million, representing 43% year-over-year growth. We finished the quarter with $90.8 million of total revenue within the guidance range that we laid out several months ago, but obviously given the accelerated mix shift less than what we would otherwise have expected. At our actual bookings results – of the mix that was in our plan going into the quarter, we would have reported revenue well above the top end of our guidance range. Net-net, we're very happy with what is clearly the best result for long-term value, strong bookings performance and a richer mix of recurring subscription business that accelerates our growth in ARR.
  • Operator:
    Thank you. We'll now be conducting a question-and-answer session. The first question is from Matt Hedberg from RBC. Please go ahead.
  • Matt Hedberg:
    Hey guys. Thanks for taking my questions. Jason for you, I guess, your ARR was obviously really strong in the primary metric, but I think all of us are going to be looking at and judge the health of the business, it was good to see you raising the full year, license was a little bit light though? Can you remind us again, maybe sort of the thought on license revenue this year, I know you don’t guide that specifically, but how should the license revenue just optically trend throughout this year, given this faster mix shift towards subscription and SaaS?
  • Jason Ream:
    Yes, Matt, thanks for that question. We went into the year thinking that license revenue was going to trend down for the year, in other words a year-over-year decline. Obviously as the mix shifts even faster towards sort of SaaS and subscription that's going to be even more pronounced. And so, continue to think about that being a decline. Also when you think about the progression through both last year and this year, we're not only shifting year-over-year towards SaaS and subscription, but also within the year, right, this is not of course perfectly linear, but it is an ongoing transition, right, and so every quarter we're getting more towards that subscription model, and so, as the year goes along, you potentially see even bigger declines.
  • Matt Hedberg:
    Got it. That's helpful. And then Mark, you guys have been long established leader in ITA, during the quarter Okta announced their plans of entering in the market, sort of in earnest, I guess in calendar 2022. Can you talk about just sort of, what that means to the market sort of your position and just kind of what have you heard from customers on that thus far, given that Okta was a good partner as well?
  • Mark McClain:
    Thanks, Matt. In general it hasn't really felt like it's made much fundamental change in our market today. I think, a lot of folks react to their announcement as if that puts them right squarely on top of us. But today in the market, we focus on the enterprise class customer, we don't see them as often as people might think and thus far it hasn't really changed much of our selling dynamic. I think we – as you’d pointed out, we've been at this a long time and pretty strong leadership position and we find that when we're talking to the enterprise customers that we think are the right kinds of customers for us to be talking to, they're very much resonant with our solution. Quite often those customers already have Okta for their SSO or multi-factor authentication, and they quite often choose us for the governance and administration side. So it hasn't felt like it's fundamentally shifted much yet and we're certainly going to keep paying attention as we continue to pursue what we think is the solutions that those customers need. So far not much delta, as Matt last quick point I'll make is, we've seen them in our space with their LCM offering for over a year now and really that hasn't had much impact in our market to-date. So they noticed an intent for some other products next year, we'll have to wait and see what happens when those actually show up, I guess.
  • Matt Hedberg:
    Got it. Thanks a lot and congrats on the quarter guys.
  • Mark McClain:
    Thanks, Matt.
  • Operator:
    The next question is from Rob Owens with Piper Sandler. Please go ahead. Rob, your line is open.
  • Rob Owens:
    Sorry about that. Thanks for taking my question and sorry for the mute button. One, you drill down into the success you saw in ARR and more specifically, I think, as you guided this year, you talked about some legacy pipeline that effectively you thought would convert in more of a conceptual sense. And so when we see the ARR strength this quarter? Is that coming from some of that tight converting into different way than you had previously thought? Or are some of the sales cycles that you thought were moving to SaaS actually compressing and happening faster?
  • Jason Ream:
    Yes, Rob. Yes, thank you. So I think, look there is a little bit of both of those phenomenon plus a third one which is our performance, right, outperforming our own expectations and what we set for guidance. So yes there are some deals that are in the pipeline that have switched particularly more from perp to term. There have been some deals where the customer is looking IdentityIQ and they're now have purchased Identity now, so shifting all the way to SaaS that has happened as well. I think there is also, as we look at new deals that were created particularly within this year, but certainly even in the latter part of last year, more and more of those were either going in the SaaS or subscription direction. But then fundamentally also our ARR performances is reflective of the fact that we’ve really outperformed our plan.
  • Rob Owens:
    And then with regard to the acquisitions, I guess, number one, Jason, while you have the floor, was there anything inorganic than relative to the ARR performance during the quarter? And then Mark, and you can elaborate just a little bit more on the customer response. Was this something they we’re asking for, something you just found to be opportunistic relative to these additions? Thanks.
  • Jason Ream:
    Yes, I'll just quickly hit the ARR. It added about $1 million worth of ARR between the two acquisitions, so pretty immaterial from that perspective.
  • Mark McClain:
    And hey, Rob, good to talk to you. On the other side of it, I'd say two thoughts. One is a little different between the two acquisitions Rob on the ERP Maestro, which is really kind of ERP management, particularly deep in SAP, that's definitely something our customers have been kind of seeing as part of the overall value prop at times we had partnered with them and others in the field. And definitely something that we saw is kind of filling out a set of capabilities, we had sort of I'd call it somewhat shallow capabilities in SAP, ERP, we had some capability, but this really gives us a very deep and broad offering there, and that's been very well received. On the other side with what we did with Intello, that's a little more forward-leaning, so I wouldn't have characterize that as something customers were asking for per se for us to approach directly, I would tell you that what we've heard from many of our customers is that's a growing area of concern in general. And so when we announced what we were doing with that technology and how we saw it extending our value prop, it's been very well received and there's actually some really nice momentum we see building in the field on that.
  • Rob Owens:
    Great. Thanks.
  • Jason Ream:
    Thanks, Rob.
  • Operator:
    The next question is from Hamza Fodderwala from Morgan Stanley. Please go ahead.
  • Hamza Fodderwala:
    Hey guys, thank you for taking my question. And just a follow-up on Rob’s question around the inorganic impacts. Was that $1 million in ARR for Q1 specifically or just your expectations for the full year as it relates to the recent acquisitions?
  • Jason Ream:
    When you think about the full year, think about it adding a little bit more than a point to our growth rate year-over-year. So within our guidance a little bit more than a point comes from the two acquisitions. When you – the way we calculate ARR, we're taking the write down into account. And so, right now just having closed the acquisitions there isn't a ton of ARR in Q1 from those, there is a little more by the time you get to the anniversary, but pretty minimal either way you look at it.
  • Hamza Fodderwala:
    Got it. Thanks for the clarification. And then Mark, it’s my third question for you. I was wondering if you could dig into a little bit around your – the demand that you saw between existing customers versus or new customer business this quarter and kind of, if you could speak to the pipeline that you're seeing in Q2 and sort of the back half?
  • Mark McClain:
    Yes, I think in general, I guess, the short answer is both are very strong. We have a very strong set of motions for both new acquisition of customers and we're pleased with the numbers that we added this quarter and kind of where they are, kind of some very large impressive brands. Unfortunately, most of them still don't allow us to use their name publicly, but there is good momentum in large and midsize enterprise accounts that we're very happy with. But I think partly back to Rob's question on the acquisitions and just some of the additional products we brought to market organically in the last year, we're seeing a very strong kind of upsell, cross sell motion in a lot of our accounts. So both pipeline – both our performance in Q1 and the pipeline looking forward are quite strong in both kind of new account capture, as well as additional expansion over time. So both motions are very good.
  • Hamza Fodderwala:
    Got it. Thank you.
  • Mark McClain:
    Thanks, Hamza.
  • Operator:
    The next question is from Brian Essex from Goldman Sachs. Please go ahead.
  • Brian Essex:
    Hi, good afternoon; and thank you for taking the question. I was wondering if maybe you could dig in a little bit to how things are progressing through the channel, channel expansion and expansion in Europe, particularly relative to your initial expectations in the beginning of the year?
  • Mark McClain:
    I guess, so Brian, just to clear, kind of channel globally or particularly both kind of focused a little more in Europe, just unclear.
  • Brian Essex:
    Yes, both globally, as well as specifically detail around Europe and expansion of Europe.
  • Mark McClain:
    Okay, got it. Thanks. On the channel thing, I just – kind of a reminder that we still spend a lot of energy on the systems integrator quote unquote channel that as everyone knows that doesn't necessarily imply always a resell of product. So we do a lot of business, it's very heavily influenced and sometimes even uncovered by our good partners in that realm, but those are still SailPoint contracts. And those partnerships are very strong, really good momentum with the bigger size we worked with for years and frankly some good momentum with some of the ones we've worked less with over the last 10 years. And that's true globally, and then particularly in Europe, both as we all know, Europe tends to have a pretty strong channel motion. We have added a fair amount of capacity to our SailPoint salesforce over there in the last few years. And we're seeing really good production in some of the core markets we care the most about, particularly strong in some of the Northern and Western European countries. So in general, we feel good about that, we feel good about the momentum we're seeing in Europe. Asia continues to be a stronger true contributor of a small base obviously that we're actively growing over time. But yes, all around the globe, pretty pleased with channel relationships, still looking to add more what we would call classic reselling capabilities. We always liked the point, our friends at Okta, who've been a very strong partner and continue to do a lot of business with us – classic resell fashion. But yes, good momentum there, nothing that we're concerned about. Sure.
  • Brian Essex:
    Got it. An EBITDA follow-up, I mean, we've heard a number of different vendors this earnings season talk about better visibility into budgets going into the year, particularly relative to last year where it seemed as though budget visibility was pretty minimal. But you've kind of grown at a pretty robust pace through last year in spite of this. But just in general from a macro point of view, any change that you're seeing on the budget side and is that impacting your ability to accelerate, integration, sales cycles, accelerate business through the year. Just maybe any thoughts on the macro would be helpful?
  • Mark McClain:
    Yes. I think like you guys are watching all the new cycles week-to-week, month-to-month and there is a lot of noise out there as we all know. I think in general, Brian, we would still say that the tailwind – once we get through that initial rattling in March early April last year, the tailwind has been pretty consistent for us through that last five quarters, now, I guess four or five quarters, meaning you have the confirmation we got from a lot of customers who were in a pipeline cycle back then, and I've been this year in those pipeline cycles, is that this continues to be a high area of focus, certainly don't know enough about whatever just happened in the pipeline breach, but all we know is that every time something significant like that happens, it does refocus people's attention on the importance of security. And again, good news for us is that Identity is largely considered if not the core, one of the core aspects of security these days and that continues to put a lot of focus on our area of expertise and solutions for providing to our customers. So with all that, we certainly haven't felt any negativity there. I mean, I think, budget cycles are always hard to predict ever in the world of enterprises. But it’s generally in the U.S. at least we get a little more opening up that does seem to give people a little more confidence about where we're headed. But I don't know that we would say, x percent easier than it was this time a year ago or anything like that, it's just – we feel pretty confident in the demand profile because this is viewed as a pretty high priority issue to address.
  • Brian Essex:
    Got it. That's pretty helpful. Thank you.
  • Operator:
    The next question is from Brent Thill with Jefferies. Please go ahead.
  • Brent Thill:
    Thanks. Jason, on the billings number you were about $6 million short of what the street was expecting. Is that all related to this quicker transition or was there something else going on behind the scenes that related to the billing shortfall?
  • Jason Ream:
    No, Brent. That's really the transition. Keep in mind though, when you look at billings, it is somewhat difficult to parse through that number, given that we've got term license in there as well, which sort of works opposite the way, it used – under 605. But no, our billings and our collections were good, we obviously to cut to the related topic there from a cash flow perspective in Q1, we paid a pretty substantial bonus based on our performance last year, but no billings were simply reflective of the mix shift really.
  • Brent Thill:
    Okay. And that's helpful. And that highlighted that the Analyst Day, this transition to solution selling versus no point selling or whatever else you want to call it. And that move it seems to be resonating and back to your growth and SaaS, it's close to 55% growth for the year and I think 55% for Q1. I mean, it seems like there is a lot of confidence as that's paying off when you're guiding to a full year number at that type of growth.
  • Mark McClain:
    Yes, Brent. Agreed, and if anything, one of the things we're trying to highlight a little more this quarter is the growing acceptance of SaaS at the higher end of the enterprise market. I think for a long time now, we've been saying that the mid to mid-large enterprise class customers have been leaning towards SaaS for quite some time now, and that's fairly typically been our motion for a couple of years. At the higher end of the enterprise market, I'd say even in the early part of last year, we were not feeling quite the same level of shift there. And I think that began to change a little bit more in the second half, and I think we're now seeing some very large very strategic customers and brands select Identity now is their choice. Again, we still find customers who do believe IdentityIQ for regulatory or data residency reasons is the right answer, and we're still 100% supportive of those customers making that choice. But we are finding that in general, the high end of the enterprise market, as they've grown more comfortable with SaaS for this particular aspect of the Identity landscape we're seeing some good momentum at the high end, as well as the mid-to-large that we've seen already.
  • Brent Thill:
    Thanks Mark.
  • Mark McClain:
    Thanks Brent.
  • Operator:
    The next question is from Daniel Ives from Wedbush Securities. Please go ahead.
  • Daniel Ives:
    Hi, thanks. In terms of just what you're seeing in the subscription, are you seeing from the sales side just a number of deals that were even more a pull rather than push? And wanted to just actually – just want to extrapolate on the subscription side, is that something you're thinking as well?
  • Jason Ream:
    Yes.
  • Mark McClain:
    Lost a little, the last bit of the questions. Did you get that, Jason? It broke up a little on me. Okay.
  • Jason Ream:
    Yes, I think is the subscription model enabling more of a pull self-service. Look, I think it is the way that that customers prefer to buy today. So I think it removes some friction. I think, I don't know that it's changed the sales dynamic necessarily to the extent that we would call it, flipping from push to pull. I think, look broadly speaking, there is a pull in our market right now, right. There's a growing awareness that customers need identity security and that they may try to get it from someone else, but mostly they view us as the leader as we are. And so there's a clear pull there from that perspective. But net-net, I would say that the subscription model is helpful, but maybe not game changing from a deal perspective.
  • Mark McClain:
    I agree. Yes. I think it takes friction out of the cycle less than it creates new demand.
  • Daniel Ives:
    Great. And just a little follow-up, like when you think at the success that's that you're finding here. Has it basically just need sort of the team determined just rip the band-aid off, just go through this. I mean, we've seen others obviously, security, then there’d be real successful in this. Can you talk about that instead of the slowed transition maniacal focus on quarters and then two years later still going through that?
  • Mark McClain:
    Yes, I think as we said in a couple settings, I feel like it is difficult to separate some of these factors. We feel like the three biggies we'd like to point to are that the market demand for both our core offering identity security, we're kind of the way we're referring to governance and admin now. The demand is increased over time. The capabilities of our product have increased over time, giving more of those mid and large size enterprises comfort that the SaaS offering can meet their needs. And then lastly, yes, I think in the year and a half coming up on two years that Matt has been here to help kind of guide the go-to-market organization. We're getting even better and more predictable execution and predictability of our sales cycles. So it's a bit of all three that we're seeing, it’s hard to kind of separate the percentage of each factor, but all three are very real demand, capabilities and execution.
  • Daniel Ives:
    Great. Thanks.
  • Mark McClain:
    Thank you.
  • Operator:
    The next question is from Alex Henderson from Needham. Please go ahead.
  • Alex Henderson:
    Great, thanks. I was hoping you could talk a little bit about the sequential increase in costs associated with the acquisition. So just to give us some sense of how much we should be putting into R&D, sales and marketing, G&A, the OpEx lines due to the two acquisitions?
  • Jason Ream:
    Yes. So Alex, this is Jason. We specifically changed our profitability outlook this quarter for the full year to reflect the ERP Maestro. And there's about a $5 million impact for the year. Again, keep in mind that from a revenue perspective, there's an acquisition right down, so we're getting less revenue than we might otherwise out of that. But that gives you a pretty good sense. Intello was done before our last guidance. And so we didn't call that out separately, but think about it in the same ballpark from a size perspective. And for both of them, really, most of the expenses going into the R&D line, we don't have separate sales forces for either of those. So they're sold by our one and only sales force. And there'll be some marketing work that goes on for both of those products. And obviously, there's some G&A in the background, but really all the resources that we added and are adding are really focused on the product side of things.
  • Alex Henderson:
    So just to be clear, if it wasn't for the Intello acquisition, your profitability would have been unchanged, or should we assume that your profitability would have changed one way or the other exclusive of the deal and the deal is plus what the change was in that type, because it's not clear what the addition is or what the baseline would have done, excluding it? Can you just parse between those two a little bit because that's the crux of the question?
  • Jason Ream:
    Yes. So we maintained our revenue outlook, and I can tell you that there's very minimal revenue contribution from ERP Maestro. And we changed our profitability outlook by $5 million, essentially $5 million more of operating loss, which essentially telling you that there's around $5 million of net expense from that deal. It's not exacts. We gave a guidance range that has round numbers in it, and it wasn't exactly that round number, but that's the vast majority of that change.
  • Alex Henderson:
    Okay. Thank you. If I could ask the second question then going back to the integration and the shift to subscription and cloud orientation. Can you talk a little bit about, to what extent, you're seeing any improvement in the selling cycle, is the less friction than the more comfort with the large enterprises in the subscription business and SaaS business resulting in the shortening of your cycle time with deals? Or any change in deal sizes? Thanks.
  • Jason Ream:
    So a few questions there, net-net, I think the short answer is not really. The longer answer is actually our deal sizes have been getting a little bit bigger. Our sales cycles have been getting a little bit shorter. I would put most of that though, to execution, right. That as Matt is tuning up the sales force and as the entire team is learning how to do, what we do at scale and how to do it repeatably, we're focusing on execution process. And that leads to shorter deal times. Not all of it is on our side, of course, but the things that we can control we're controlling better than we have before. And so that's improving things. I think that the SaaS and cloud effects, kind of like we talked before about what that does to the deal momentum. I think it's the removal of friction, right, that removes a couple of things that the customer might otherwise have to do. But I would attribute more of our improvement in deal size and our improvement in deal cycles to intentful changes that we've made to try and drive those outcomes.
  • Alex Henderson:
    Great. That's very clear answer. Thank you very much.
  • Jason Ream:
    Thanks Alex.
  • Operator:
    The next question is from Andy Nowinski from D.A. Davidson. Please go ahead.
  • Hannah Baade:
    Hey, thanks for taking the question. This is Hannah on for Andy. You mentioned back at the Analyst Day that SaaS gross margins have been improving and how are they this quarter? And do you expect to break out SaaS margins in the future?
  • Jason Ream:
    Yes, they continue to be strong. We're not planning to break those out. I don't think it, at this point would really add to the picture. We're also – keep in mind that we're still rapidly growing that business and adding to the number of products that we have that are our SaaS based. And despite that continue to see secret margins there. I think it's we're already in a good place, but if there continues to be good momentum on our side based on the scale that we're growing and the changes we're making to our own operations.
  • Hannah Baade:
    Great. Thanks. And just one follow-up on update on how the new hires and added capacity to the sales force have been ramping. At the Analyst Day, you mentioned that the solution-oriented prescriptive selling process should help them ramp a lot faster. Just wanted to check in on that.
  • Mark McClain:
    Yes, good question, Hannah. They're definitely coming along well. We've done a lot of investment in our whole sales enablement infrastructure from people to tools to ways we help folks get onboarded quickly. We've found that as we've hired a lot of folks who came from a very strong SaaS background, their motion and comfort level in selling a SaaS enterprise solution is quite helpful and enables them to hit the ground running pretty quickly. So yes, generally, like Jason said, kind of seeing overall good improvement in sales cycles and average selling. And I guess, notably in what Matt refers to is participation, right, the kind of proportion of our team that's bringing in at least a deal every quarter. That's something we're also tracking and it’s trending well.
  • Hannah Baade:
    Thank you.
  • Mark McClain:
    Thank you.
  • Operator:
    The next question is from Joshua Tilton from Berenberg Capital Markets. Please go ahead.
  • Joshua Tilton:
    Hey guys, thanks for taking my questions. My first one has to do with the ARR guidance. I believe that it implies that H1 net new ARR accounts for a much larger portion of the annual net new ARR relative to the last two years. So how should we think about this, is this just because you're doing more SaaS or that SaaS is become a larger portion of the business, any color there would be helpful.
  • Jason Ream:
    I think, Josh, you should probably think about it as that is the guidance that we've got right now. We obviously are very pleased with what we've done in the first half and feel incredibly positive. Well, first half – sorry, we haven't had the first half yet. Very pleased about what we did in the first quarter and feel very good about the rest of the year. And I think that we can keep delivering strong ARR growth.
  • Joshua Tilton:
    Right. I appreciate the preview for next quarter. And then my follow-up, would it be possible to maybe get a sense of the revenue mix between term and perpetual in the on-premise business, or maybe just what was recurring revenue as a percentage of total revenue in the quarter?
  • Jason Ream:
    I think I mentioned in the script that over 70% of our new sales were subscription-based in terms of – it's a little hard to answer in terms of revenue. I mean, revenue, we have subscription revenue on the face of the income statement, right. So that sort of is the answer. I think if the question you're getting to is, how much of our sales are subscription-based, well, that's the answer more than 70% this quarter. And if you remember from the Analyst Day, we are expecting to effectively be almost all subscription-based next year, holding out potentially a small bit of room for stragglers, so to speak, right, but effectively 100% subscription by Q1 of next year.
  • Joshua Tilton:
    Thanks. That's helpful.
  • Operator:
    The next question is from Yun Kim from Loop Capital. Please go ahead.
  • Yun Kim:
    Thank you. First, congrats on a solid bookings quarter, Mark, you mentioned a one large deal in your prepared remarks that included machine identities. Can you talk about how common is that to include those machine accounts in deals today and what is a typical pricing lift or ARR uplift when you include those machine accounts in your deal, then are you able to charge the same pricing as the actual human user or is it much lower? Just kind of some questions around the pricing around that and then is this something that represents potentially a meaningful add-on sales opportunity to existing customers?
  • Mark McClain:
    Okay. Hey Yun, that’s a got four-part question. I'm going to do my best to unpack all four parts. I think in some ways, yes, we are seeing it more common that our enterprise class customers have, I'll say this in some flavor of non-human identities, right. We're not sure what the right term is in today's market, but there is robotic processes that are non-human identities, right, where there's a software bot that sort of emulating the behavior of human. There are true machine – historical machine identities, things like systems and service accounts that are actually represented an actual physical machine. There are new IoT types of devices, some of which are sophisticated enough that they also kind of make the behavior of an identity. And so there's a collection of different types of machine identities out there. And some flavor of that is fairly commonly being discussed in a lot of our deals now. It doesn't necessarily mean it's going to happen at the initial sale time. It might be something the customer looks to come back and bring along in a subsequent additional sale, but it's certainly a topic that comes up a lot. So I think that was kind of question part A. I think part B is, do we charge the same for that as for human identities, generally no, but it does vary by what exactly is happening in that customers environment. And the volume of those and how the volume of those compare against the human identities. We have a fairly flexible approach for customers sort of getting into this realm and don't always know exactly how they're thinking about these new flavors of identity that are not people and how they think about that. So it definitely does represent, we believe over – certainly over the long haul. I think the third part of your question, over the long haul, does this represent an expansion of the opportunity landscape? And we think it does. We've said for a long time that the identities we manage for a given enterprise, A, aren’t limited to their employees because there's a lot of non-employee humans, contractors, partners, et cetera, that we can often receive licenses and compensation for. And now there are non-human identities that will also be part of their view of their identity landscape. So yes, we think it just continues to add to the size of the potential market.
  • Yun Kim:
    Just want to make sure is this a product a SaaS product or is it both SaaS and on-prem product?
  • Mark McClain:
    This particular example we talked about was I think for SaaS, but in general, yes, we are handling various flavors of machine identities with both IdentityIQ and IdentityNow.
  • Yun Kim:
    Okay, great. And Jason, very easy question for you. I think you’re getting some tougher questions tonight. Obviously, the model shift going on, but what are the dynamics you were seeing on the contract length for those SaaS deals and are you able to maintain that three year duration? And also if you can remind us the billing frequency of the SaaS deals?
  • Jason Ream:
    Yes, Yun. So the term length for SaaS deals have been pretty standard, new deals are typically three years. We actually see some customers who want to do longer deals. We don't give an incentive to do that, but customers sometimes want to sort of lock in the deal. And so sometimes we'll do a four or five-year deal, we don't do new deals that are shorter. There are occasional times when an existing customer is co-terming with their existing deal. And so an upsell might be shorter than three years, but new deals are three years or longer. Billing for SaaS is almost always annual. There might – no, they're always annual, trying to think if we've done any that are quarterly, but not really aware.
  • Mark McClain:
    I think prepaid upfront, which is very, I guess, we wouldn't bill, right. We don't really take that with any…
  • Jason Ream:
    Not a standard thing.
  • Mark McClain:
    Yes, not a standard thing.
  • Yun Kim:
    All right. Great. Thank you so much, guys.
  • Jason Ream:
    Thanks Yun.
  • Operator:
    This concludes the question-and-answer session. I would like to turn the floor back over to Mark McClain for closing comments.
  • Mark McClain:
    Thank you very much, operator. And thank you to everyone who joined the call today. Again shout out to our teams who continue to persevere and deliver really, really strong results through still somewhat challenging times. And again, we have a team in India, as so many tech companies do our hearts got to the folks there, it's been a pretty rough road for those folks. So we're continuing to think about them and wish them well. And thanks for everyone's attention. We appreciate your interest. Thanks for joining the call.
  • Operator:
    This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.